Top senators take aim at bitcoin adoption in El Salvador over national security risks
Ttwo senators have introduced legislation that they hope will be a safeguard against any risks that El Salvador’s use of bitcoin as legal tender may pose.
Sens. Bob Menendez (D-NJ) and Jim Risch (R-ID) — chairman and ranking member, respectively, of the Foreign Affairs Committee — announced the legislation, called the Accountability for Cryptocurrency in El Salvador Act, on Friday. The legislation was previously introduced and passed out of committee last year.
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The legislation specifically mandates that the State Department produce a report explaining the risks to cybersecurity, economic stability and democratic governance in El Salvador posed by the introduction of the flagship cryptocurrency.
“Using cryptocurrency as legal tender can undermine economic and financial stability and empower malicious actors,” Risch said. “Given the United States’ interest in prosperity and transparency in Central America, we must seek greater clarity on how the use of Bitcoin as legal tender may affect El Salvador’s financial and economic stability, as well as El Salvador’s capacity to effectively combat money laundering and illicit finance. ”
Salvadoran President Nayib Bukele, a young technocrat, announced that his country would make bitcoin legal tender in 2021, becoming the first country to make such a move.
The historic decision excited cryptocurrency evangelists, but bitcoin subsequently plunged in price.
El Salvador introduced federal digital wallets called Chivo, with the president envisioning Salvadorans using Chivo to pay for a variety of products and services. The government has invested millions of dollars in bitcoin ATMs across the country.
When the legislation that sought to analyze the risks of El Salvador’s adoption of bitcoin was introduced earlier, Bukele himself railed against US lawmakers.
“Never in my wildest dreams would I have thought that the US government would be afraid of what we’re doing here,” the president, a prolific user of social media, posted on Twitter last March.
“The US government does NOT stand for freedom and that is a proven fact. So we will stand for freedom. Play!” Bukele said, adding that bitcoin is “FU money.”
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Bitcoin, ethereum and other cryptocurrencies have seen some positive growth since the start of the new year, with investors hoping to put a dismal 2022, which was marked by huge price drops and the implosion of crypto giant FTX, behind them.
On New Year’s Day, bitcoin was trading around $16,500 and was generally below $17,000 in the period since FTX’s dramatic implosion in mid-November. But as of Friday, the flagship digital asset was trading at around $26,300 – a gain of around 60%. Ethereum has also increased by a lot in the same period.
